I was the judge for the
WTOGam claim on the Foresight Exchange, which concerned the suit by Antigua before the WTO on whether the gambling laws in the US discriminated against foreign providers of gambling services in a way that wasn’t allowed under the Trade Agreements the US had signed. The decision was final in April, and someone called my attention to it about a week ago.
The WTO’s decision is 143 pages long, and the press reports at the time had widely varying views of the results, so it took a bunch of
analysis (and consulting with at least one expert) to come up with a ruling.
The WTO appeals body’s decision was complex, (here’s their summary) overruling some parts of the original ruling, sustaining others, and declining to state an opinion on yet others, so deciding how WTOGam should come out wasn’t simple.
My ruling (lots of details there) hinged on the details of what the FX claim was supposed to be about (i.e. did theWTO appeals body overrule the decision of the original panel?) It
could have gone either way, but I ruled that the appeals body had upheld the original decision even though they significantly narrowed the grounds for the ruling.
A more important question, now that I’ve looked at all the details, is what did the WTO decide and what does it mean for gambling laws in the US? And will it have any effect on prediction markets?
The final decision was that the Interstate Horseracing Act illegally permits domestic suppliers to provide gambling services interstate, while forbidding foreign suppliers from providing the same services. The original ruling had said that several other state and federal laws were also counter to WTO standards, but for a variety of reasons, those original decisions were overturned. So the bottom line ruling from the WTO is that if the US allows interstate gambling provided domesticly, then foreign providers have to be allowed to do anything domestic providers can do. This is good news for the liberalization of trading restrictions on gambling (and restrictions on services generally.) But it’s impact on gambling is moderated by the fact that the federal government really, really wants to outlaw internet gambling.
On the gripping hand, there’s a domestic gambling lobby that will make it tough to tighten down restrictions on interstate gambling that’s currently legal. I’d guess that the most likely outcome is gridlock in Congress. (Surprise! :-) The result of that would be no change in the laws, which means the state and federal prosecutors would be free to threaten and bring court cases. I’m not enough of a lawyer to be able to handicap the likely results when those cases are appealed to the Supreme Court. (For that we need prediction markets.) But it does mean that people wanting to host prediction markets off-shore should be prepared for legal charges.
As I’ve said a couple of times, my preferred approach is to choose a combination of subjects, time frames, and publicity that position a prediction market as being about public policy rather than entertainment or gambling, but there are many other approaches.
And none of this looks like it will push anyone to liberalize our laws to allow domestic competition with prediction markets that are legal overseas. So the markets in Ireland and the Bahamas willl continue to have protection from American competition.